The market was dragged lower on Monday by a sudden late-afternoon slump in the B-share index amid yuan depreciation fears, but the index bounced more than 2 percent on Tuesday as investors judged the mysterious sell-off was excessive.

"The B-share market has very poor liquidity, so is prone to high volatility," said Chang Chengwei, analyst at Hengtai Futures Co.

"Since yesterday's market fall was driven mainly by fear, rather than fundamentals, some investors saw this as a chance to buy shares at lower prices."

All eyes are on China's economic data to be released this week, including GDP, new loans, money supply and retail sales, which investors hope will paint a clearer picture of the country's economic health.

Most sectors rose, with infrastructure and industrial stocks leading the gains.

China Railway shot up as much as 10 percent, while China Communications Construction and China Railway Construction both surged more than 8 percent at one point. (Reporting by the Shanghai Newsroom; Editing by Jacqueline Wong)